2023-06-27 08:20:14
Closing oil, coal and gas production sites before they become unprofitable is necessary for an ambitious climate policy, writes a team led by the economist Gregor Semieniuk from the University of Massachusetts currently in the trade magazine “Joule”. But if the closures come unexpectedly quickly, all those who have invested in them lose money. Among other things, this would also affect investment models for pension provision for broader sections of the population.
The experts write that this concern could prompt governments to slow down the energy transition. However, in order to achieve the Paris climate targets of a maximum of two degrees above the pre-industrial level, fast and far-reaching protective measures would have to be taken. Estimates at the world climate conference in Egypt at the end of 2022 showed that the current climate protection plans would lead to a world around three degrees Celsius warmer.
The rich hardly feel losses
Semieniuk’s team has now dealt with part of the economic effects of the transition; specifically with the question of which assets – stocks, funds, etc. – invested in fossil fuels would be lost in industrialized countries if there was a sudden switch to renewable energies.
Result: According to the calculation, two thirds of the losses – of an estimated 350 billion dollars in the USA, 200 billion in Europe – would be borne by the richest ten percent of the population, half of them even only by the richest one percent. However, such wealthy individuals diversify their investments so that the loss from fossil investments would be less than 1 percent of their net worth.
State compensation for the poor is feasible
In contrast, around 3.5 percent of financial losses would affect the poorer half of the population – roughly the same in the US as in Europe. Although the loss is more significant in this group, it is not high in absolute terms: the researchers estimate that it could be offset by $9 billion in Europe and $12 billion in the US.
Gregor Semieniuk and his team outline three possible ways governments could raise these sums of money: a carbon tax, renegotiating debt to energy companies, or a moderate tax on the wealthiest.
Semieniuk emphasizes in one sending from the University of Massachusetts: “It is not untrue that some wealth is at risk, but in prosperous countries it is no reason for government inaction because it would be so cheap to compensate for these losses.”
Upper middle class hardly affected
That 40 percent who are in the richest half of the population, but not in the top 10 percent, have proportionally even less invested in fossil fuels than the wealthiest. Your wealth consists more of real estate. They would therefore be very little affected by losses from fossil investments, the experts write.
For her analysis, she used data for modeling financial networks to obtain information on how much wealth is invested where in oil and gas deposits. They combined this information, along with detailed macroeconomic data, with estimates of financial wealth and total wealth distribution for the United States and European countries.
Not included in the calculation are losses in other parts of the world – including in the oil-producing countries in the Arab world – and other types of economic losses, for example jobs in the oil, gas and coal industries or in sectors that require fossil fuels .
But at least for the US and Europe, the bottom line among experts is, “Any loss of wealth that causes economic hardship can be compensated for at little cost.”
#Energy #transition #Financial #losses #rich